IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
CONOCOPHILLIPS PETROZUATA B.V.,
PHILLIPS PETROLEUM COMPANY
VENEZUELA LIMITED, CONOCOPHILLIPS
GULF OF PARIA B.V. AND CONOCOPHILLIPS
HAMACA B.V.,
Plaintiffs,
v.
PETRÓLEOS DE VENEZUELA, S.A.,
PDV HOLDING, INC., CITGO HOLDING,
INC., and CITGO PETROLEUM CORPORATION,
Defendants.
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C.A. No. 16-cv-904-LPS
REPLY MEMORANDUM OF LAW IN SUPPORT OF THE
MOTION TO DISMISS OF DEFENDANT PETROLEOS DE VENEZUELA, S.A.
OF COUNSEL:
Joseph D. Pizzurro
Peter J. Behmke
Kevin A. Meehan
Julia B. Mosse
CURTIS, MALLET-PREVOST,
COLT & MOSLE LLP
101 Park Avenue
New York, NY 10178
(212) 696-6000
jpizzurro@curtis.com
pbehmke@curtis.com
kmeehan@curtis.com
jmosse@curtis.com
April 17, 2017
HEYMAN ENERIO
GATTUSO & HIRZEL LLP
Samuel T. Hirzel, II (#4415)
300 Delaware Avenue, Suite 200
Wilmington, DE 19801
(302) 472-7300
shirzel@hegh.law
Attorney for the Defendant Petróleos de
Venezuela, S.A.
Case 1:16-cv-00904-LPS Document 30 Filed 04/17/17 Page 1 of 15 PageID #: 351
TABLE OF CONTENTS
Page
PRELIMINARY STATEMENT .....................................................................................................1
ARGUMENT ...................................................................................................................................2
I. Plaintiffs Cannot Establish Subject Matter Jurisdiction under the FSIA’s
Commercial Activity Exception ..............................................................................2
A. The First Two Clauses of the Commercial Activity Exception
Do Not Apply ...............................................................................................2
B. The Third Clause of the Commercial Activity Exception
Does Not Apply ...........................................................................................6
II. There Is No Personal Jurisdiction ............................................................................8
III. The Complaint Should Be Dismissed for Failure to State a Claim .........................9
CONCLUSION ..............................................................................................................................10
i
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TABLE OF AUTHORITIES
Page
Cases
Antares Aircraft, L.P. v. Federal Republic of Nigeria,
948 F.2d 90 (2d Cir.1991) .......................................................................................................... 7
Arch Trading Corp. v. Republic of Ecuador,
839 F.3d 193 (2d Cir. 2016) ....................................................................................................... 3
Atlantica Holdings v. Sovereign Wealth Fund Samruk-Kazyna JSC,
813 F.3d 98 (2d Cir. 2016) ......................................................................................................... 8
Bell Helicopter Textron, Inc. v. Islamic Republic of Iran,
734 F.3d 1175 (D.C. Cir. 2013) .................................................................................................. 6
Big Sky Network Canada, Ltd. v. Sichuan Provincial Gov’t,
533 F.3d 1183 (10th Cir. 2008) .................................................................................................. 8
Corzo v. Banco Central de Reserva del Peru,
243 F.3d 519 (9th Cir. 2001) ...................................................................................................... 8
Cruise Connections Charter Mgmt. 1, LP v. Attorney General of Canada,
600 F.3d 661 (D.C. Cir. 2010) ................................................................................................ 7, 8
Crystallex Int'l Corp. v. Petróleos de Venezuela, S.A.,
No. CV 15-1082-LPS, 2016 WL 5724777 (D. Del. Sept. 30, 2016) ...................................... 4, 5
EM Ltd. v. Banco Central de la Republica de Argentina,
800 F.3d 78 (2d Cir. 2015) ..................................................................................................... 3, 4
Federal Ins. Co. v. Richard I. Rubin & Co., Inc.,
12 F.3d 1270 (3d Cir. 1993) ................................................................................................... 3, 4
First Nat’l City Bank v. Banco Para El Comercio Exterior de Cuba,
462 U.S. 611 (1983) ................................................................................................................ 1, 3
Frank v. Commonwealth of Antigua & Barbuda,
842 F.3d 362 (5th Cir. 2016) ...................................................................................................... 8
General Elec. Capital Corp. v. Grossman,
991 F.2d 1376 (8th Cir. 1993) ................................................................................................ 5, 8
Goodman Holdings v. Rafidain Bank,
26 F.3d 1143 (D.C. Cir. 1994) .................................................................................................... 7
ii
Case 1:16-cv-00904-LPS Document 30 Filed 04/17/17 Page 3 of 15 PageID #: 353
Guirlando v. T.C. Ziraat Bankasi A.S.,
602 F.3d 69 (2d Cir. 2010) ..................................................................................................... 6, 7
Helmerich & Payne Int’l Drilling Co. v. Bolivarian Republic of Venezuela,
784 F.3d 804 (D.C. Cir. 2015) ................................................................................................ 7, 8
Hester Int'l Corp. v. Fed. Republic of Nigeria,
879 F.2d 170 (5th Cir. 1989) ...................................................................................................... 4
Int’l Housing Ltd. v. Rafidain Bank Iraq,
893 F.2d 8 (2d Cir. 1989) ........................................................................................................... 7
Janvey v. Libyan Inv. Auth.,
478 F. App'x 233 (5th Cir. 2012) ................................................................................................ 9
Janvey v. Libyan Inv. Auth.,
840 F.3d 248 (5th Cir. 2016) ...................................................................................................... 7
Kensington International Ltd. v. Itoua,
505 F.3d 147 (2d Cir. 2007) ............................................................................................... 1, 2, 6
Lubian v. Republic of Cuba,
440 F. App’x 866 (11th Cir. 2011) ............................................................................................. 8
OBB Personenverkehr AG v. Sachs,
136 S. Ct. 390 (2015) .................................................................................................................. 5
Orient Mineral Co. v. Bank of China,
506 F.3d 980 (10th Cir. 2007) .................................................................................................... 7
Republic of Argentina v. Weltover, Inc.,
504 U.S. 607 (1992) .................................................................................................................... 7
Rogers v. Petroleo Brasileiro, S.A.,
673 F.3d 131 (2d Cir. 2012) ....................................................................................................... 5
Schoeps v. Bayern,
611 F. App’x 32 (2d Cir. 2015) .................................................................................................. 5
Stephens v. Nat’l Distillers & Chem. Corp.,
69 F.3d 1226 (2d Cir. 1995) ....................................................................................................... 9
Terenkian v. Republic of Iraq,
694 F.3d 1122 (9th Cir. 2012) .................................................................................................... 6
Thai Lao Lignite (Thailand) Co. v. Gov’t of Lao People’s Democratic Republic,
No. 10-cv-5256, 2013 WL 1703873 (S.D.N.Y. Apr. 19, 2013) ................................................. 9
iii
Case 1:16-cv-00904-LPS Document 30 Filed 04/17/17 Page 4 of 15 PageID #: 354
Transamerica Leasing, Inc. v. La Republica de Venezuela,
200 F.3d 843 (D.C. Cir. 2000) ................................................................................................ 3, 4
Federal Statutes
28 U.S.C. § 1602 ............................................................................................................................. 1
28 U.S.C. § 1605(a)(2) ................................................................................................................ 1, 2
28 U.S.C. § 1610(d) ........................................................................................................................ 9
28 U.S.C. §§ 1330 ........................................................................................................................... 1
State Statutues
6 Del. C. § 1301 .............................................................................................................................. 2
6 Del. C. § 1304(a)(1) ..................................................................................................................... 5
6 Del. C. § 1304(a)(2)(b) ................................................................................................................ 6
iv
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PRELIMINARY STATEMENT
Defendant Petróleos de Venezuela, S.A. (“PDVSA”) is indisputably a foreign state under
the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. §§ 1330, 1602, et seq. (“FSIA”) and
therefore presumptively immune from the jurisdiction of this Court. While the Complaint does
not assert any specific statutory exception to foreign sovereign immunity, Plaintiffs contend in
their brief that all three clauses of the FSIA’s commercial activity exception, 28 U.S.C.
§ 1605(a)(2), apply. However, Plaintiffs cannot establish subject matter jurisdiction under any of
those exceptions to immunity.
The first and second clauses of the commercial activity exception only apply where the
plaintiff’s suit is “based upon” the foreign sovereign defendant’s conduct in the United States. The
Complaint does not allege that PDVSA did anything in the United States. Plaintiffs, nevertheless,
argue that the CITGO Defendants’1 activities in the United States should be attributed to PDVSA
for purposes of establishing FSIA jurisdiction because those entities are direct and indirect
subsidiaries of PDVSA. However, Plaintiffs’ argument is foreclosed by the Supreme Court’s
decision in First Nat’l City Bank v. Banco Para El Comercio Exterior de Cuba (“Bancec”), 462
U.S. 611 (1983), which held that foreign states and their duly created subsidiaries are
presumptively treated as separate entities for purposes of the FSIA. And there are no allegations
in the Complaint that would demonstrate the sort of “extensive control” required to rebut the
presumption of separateness set forth in Bancec.
The third clause (or so-called “direct effect” clause) of the FSIA’s commercial activity
exception is also inapplicable because, as the Second Circuit explained in Kensington International
1 “CITGO Defendants” refers to the other defendants in this case: PDV Holding, Inc. (“PDVH”), CITGO Petroleum
Corporation (“CITGO Petroleum”) and CITGO Holding, Inc. (“CITGO Holding”).
Case 1:16-cv-00904-LPS Document 30 Filed 04/17/17 Page 6 of 15 PageID #: 356
Ltd. v. Itoua, 505 F.3d 147 (2d Cir. 2007), a transfer of assets which may frustrate the payment of
a U.S. judgment does not have a “direct effect in the United States.” While Kensington is directly
on point, Plaintiffs simply ignore it. Instead, Plaintiffs assert that any transfer of assets into or out
of the United States constitutes a “direct effect in the United States” regardless of whether such
transfers had any effect on the plaintiff. While a foreign state’s failure to make a payment may
constitute a “direct effect” where the foreign state has an express contractual obligation to make
the payment in the United States, courts have held that a transfer of assets out of the United States
does not constitute a “direct effect in the United States.” And Plaintiffs have not cited any case
applying the “direct effect” clause where, as here, the foreign state’s conduct abroad had no “direct
effect” on a plaintiff in the United States.
Finally, this action is a transparent attempt to skirt the FSIA’s prohibition against
prejudgment relief. While Plaintiffs argue that they are not seeking any relief in advance of a
judgment on their DUFTA2 claims, the Complaint is plainly seeking relief in advance of a
judgment on potential arbitration awards. Plaintiffs cannot evade the FSIA’s prohibition on
prejudgment attachment by cloaking their request for pre-award relief in the guise of a DUFTA
claim.
ARGUMENT
I. Plaintiffs Cannot Establish Subject Matter Jurisdiction
under the FSIA’s Commercial Activity Exception
A. The First Two Clauses of the Commercial Activity Exception Do Not Apply
The first and second clauses the FSIA’s commercial activity exception apply only where
the plaintiff establishes that its suit is “based upon” the foreign state’s activity in the United States.
28 U.S.C. § 1605(a)(2). Here, there is no allegation that PDVSA did anything in the United States;
2 “DUFTA” refers to the Delaware Uniform Fraudulent Transfer Act, 6 Del. C. § 1301, et seq.
2
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Plaintiffs’ assertion that PDVSA engaged in activities in the United States is entirely predicated
on their assertion that the activities of the CITGO Defendants in the United States should be
attributed to PDVSA. (D.I. 29 at p. 7.) However, in order for that assertion to survive a motion
to dismiss, the Complaint must, at least, contain allegations, which if true, would be sufficient to
overcome the presumption of separateness to be accorded PDVSA and its subsidiaries under the
Supreme Court’s decision in Bancec. See Federal Ins. Co. v. Richard I. Rubin & Co., Inc., 12
F.3d 1270, 1287 (3d Cir. 1993) (discussing Bancec, 462 U.S. at 626-27). Bancec sets forth a
“strong” presumption of separateness, and “both Bancec and the FSIA legislative history caution
against too easily overcoming the presumption of separateness.” Arch Trading Corp. v. Republic
of Ecuador, 839 F.3d 193, 201 (2d Cir. 2016). The Bancec presumption can only be overcome
where the “corporate entity is so extensively controlled by its owner that a relationship of principal
and agent is created,” or where respecting the corporate form “would work fraud or injustice.”
Federal Ins. Co., 12 F.3d at 1287 (quoting Bancec, 462 U.S. at 629). Although Bancec dealt with
the attribution of substantive liability, courts, including the Third Circuit, have consistently applied
the Bancec presumption in determining FSIA jurisdiction. See id. The plaintiff bears the heavy
burden of rebutting the Bancec presumption. See Arch Trading, 839 F.3d at 200.
In order to demonstrate the level of “extensive control” required to rebut the Bancec
presumption, a plaintiff must demonstrate that the parent exercises significant and repeated
domination and control over the day-to-day operations of the entity in question. See EM Ltd. v.
Banco Central de la Republica de Argentina, 800 F.3d 78, 91 (2d Cir. 2015); Transamerica
Leasing, Inc. v. La Republica de Venezuela, 200 F.3d 843, 848 (D.C. Cir. 2000). “[C]ontrol is
relevant [under Bancec] when it significantly exceeds the normal supervisory control exercised by
any corporate parent over its subsidiary and, indeed, amounts to complete domination of the
3
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subsidiary” such that the parent and subsidiary are “not meaningfully distinct entities.”
Transamerica Leasing, 200 F.3d at 848.
Here, Plaintiffs’ allegations are woefully insufficient to rebut the Bancec presumption.
While the Complaint asserts that PDVSA is the alter ego of the Bolivarian Republic of Venezuela
(“Republic”), there is no allegation that any of the CITGO Defendants is an alter ego of PDVSA.
(D.I. 1 at ¶ 63.) Instead, the Complaint merely states that “PDVSA controls and dominates
CITGO” and that certain directors of the CITGO Defendants have some sort of “connection” to
PDVSA. (Id. at ¶ 54.) But allegations of majority ownership and control of a subsidiary’s board
of directors merely reflect an ordinary parent/subsidiary relationship and are therefore insufficient,
as a matter of law, to overcome the Bancec presumption. See Federal Ins. Co., 12 F.3d at 1286-
87; see also EM Ltd., 800 F.3d at 91 (“[C]ourts have consistently rejected the argument that the
appointment or removal of an instrumentality’s officers or directors, standing alone, overcomes
the Bancec presumption.”); Transamerica Leasing, 200 F.3d at 848 (“If majority stock ownership
and appointment of the directors were sufficient, then the presumption of separateness announced
in Bancec would be an illusion.”); Hester Int'l Corp. v. Fed. Republic of Nigeria, 879 F.2d 170,
181 (5th Cir. 1989) (“The two factors of 100% ownership and appointment of the Board of
Directors cannot by themselves force a court to disregard the separateness of the juridical
entities.”). Thus, Plaintiffs’ allegations demonstrate, at most, nothing more than the sort of
ordinary parent/subsidiary relationship that courts, including the Third Circuit, have consistently
held insufficient to rebut the Bancec presumption of separateness. See, e.g., Federal Ins. Co., 12
F.3d at 1286-87.
Plaintiff wrongly suggests that this Court held in Crystallex Int'l Corp. v. Petróleos de
Venezuela, S.A. (“Crystallex”), No. CV 15-1082-LPS, 2016 WL 5724777 (D. Del. Sept. 30, 2016)
4
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that the CITGO Defendants’ actions are attributable to PDVSA. (D.I. 29 at p. 7.) In Crystallex,
this Court held that the allegations that PDVSA and/or the Republic “orchestrated” and “directed”
the 2015 dividend transaction were sufficient for purposes of pleading that PDVH’s transfer of
dividend proceeds to PDVSA was “by a debtor” as required under 6 Del. C. § 1304(a)(1).3
Crystallex, 2016 WL 5724777 at *5. That decision only dealt with the CITGO Defendants’ motion
to dismiss. This Court did not conclude that the acts of any CITGO Defendant could be attributed
to PDVSA for purposes of establishing subject matter jurisdiction under the FSIA.
In any event, it is not enough that the foreign state engage in some commercial activity in
the United States; rather, the plaintiff’s case must be “based upon” such commercial activity. See
Grossman, 991 F.2d at 1383. An action is “based upon” a commercial activity if that activity
constitutes the “gravamen” of the plaintiff’s lawsuit – i.e. the foreign state’s allegedly wrongful
conduct that injured the plaintiff. OBB Personenverkehr AG v. Sachs, 136 S. Ct. 390, 395-96
(2015). Here, Plaintiffs’ suit is not “based upon” any act performed by any defendant in the United
States. The transactions at issue are perfectly legitimate and Plaintiffs do not allege otherwise.
Plaintiffs allege that the transactions are wrongful only because PDVSA intended them to hinder
Plaintiffs’ potential future collection efforts – and that wrongful intent was allegedly formed in
Venezuela, not the United States. Indeed, where, as here, there are no allegations that the foreign
state did anything in the United States, the foreign state’s deliberative process is an act that occurs
in the foreign state – not the United States. See Rogers v. Petroleo Brasileiro, S.A., 673 F.3d 131,
138 (2d Cir. 2012) (“The decision by a foreign state not to perform is itself an act, but it is not an
3 There is no allegation as to what PDVSA did to “orchestrate” the dividend transaction. But even if the Complaint
had alleged a meeting in, or communications to, the United States, which it does not, such allegations would still be
insufficient to satisfy the “substantial contact” requirement of the first clause of the commercial activity exception.
See General Elec. Capital Corp. v. Grossman, 991 F.2d 1376, 1383-84 (8th Cir. 1993); see also Schoeps v. Bayern,
611 F. App’x 32, 34 (2d Cir. 2015).
5
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act in the United States; it is an act in the foreign state.”) (quoting Guirlando v. T.C. Ziraat Bankasi
A.S., 602 F.3d 69, 76 (2d Cir. 2010)); Terenkian v. Republic of Iraq, 694 F.3d 1122, 1138 (9th Cir.
2012) (same). Thus, the “gravamen” of Plaintiffs’ suit (i.e. the allegedly wrongful conduct that
injured Plaintiffs) lies in Venezuela, not the United States, and therefore Plaintiffs suit cannot be
“based upon” any activity in the United States.4
B. The Third Clause of the Commercial Activity Exception Does Not Apply
Plaintiffs’ cannot establish subject matter jurisdiction under the “direct effect” clause
because they cannot, as a matter of law, establish any “direct effect in the United States.” At most,
the Complaint alleges that PDVSA’s conduct might interfere with Plaintiffs’ future efforts to
collect on judgements that might be entered on arbitration awards that might be rendered against
PDVSA or the Republic. Such potential inference is far too remote, attenuated and speculative to
constitute a “direct effect.” See Kensington, 505 F.3d at 158-59.5
The only case that speaks directly to the question before this Court is the Second Circuit’s
decision in Kensington, which held that asset transfers made to frustrate a creditor’s ability to
enforce a judgment obtained in the United States does not satisfy the “direct effect” test, because
the judgment itself does not impose an obligation to pay in the United States; it can be paid in any
place from assets located anywhere. See id. While Kensington is directly on point, Plaintiffs do
not even mention it.
Instead, Plaintiffs argue that the transfers alleged in the Complaint constitute a “direct
4 This analysis applies equally to Plaintiffs’ constructive fraudulent transfer claims. Those claims are predicated on 6
Del. C. § 1304(a)(2)(b), which requires a showing that the defendant acted with a particular intent or state of mind,
i.e. – the intent or belief that the debts incurred were beyond the debtor’s ability to repay as they became due.
5 The possible interference with Plaintiffs’ future efforts to collect on potential arbitration awards is precisely the sort
of a speculative financial harm that has routinely been found to insufficient to satisfy the “direct effect” requirement.
See, e.g., Bell Helicopter Textron, Inc. v. Islamic Republic of Iran, 734 F.3d 1175, 1184 (D.C. Cir. 2013). And because
Plaintiffs are all foreign corporations any such financial harm would have been suffered abroad and not in the United
States. See Kensington, 505 F.3d at 158.
6
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effect in the United States” on the grounds that any transfer of assets into or out of the United
States constitutes a “direct effect in the United States” regardless of whether such transfers had
any effect on the plaintiff.6 (D.I. 29 at p. 10.) Plaintiffs’ argument is predicated on an erroneous
reading of the Supreme Court’s decision in Republic of Argentina v. Weltover, Inc., 504 U.S. 607
(1992), which held that the foreign state’s failure to pay the plaintiffs constituted a “direct effect”
because the foreign state had an express contractual obligation to make the payments in the United
States. Nothing in Weltover even suggests that a transfer of assets out of the United States could
ever constitute a “direct effect in the United States.” In fact, following Weltover, courts have held
that the transfer of assets out of the United States does not constitute a “direct effect.” See Janvey
v. Libyan Inv. Auth., 840 F.3d 248, 263 (5th Cir. 2016); see also Guirlando, 602 F. 3d at 74-75
(“[t]he transfer of funds out of [a] New York bank account … [is] not [itself] sufficient to place
the effect of [a] defendant[’s] conduct ‘in the United States’ within the meaning of § 1605(a)(2)”)
(quoting in Antares Aircraft, L.P. v. Federal Republic of Nigeria, 948 F.2d 90, 95 (2d Cir.1991)).
Plaintiffs do not cite any authority to the contrary.7
In addition, contrary to Plaintiffs’ assertions, Cruise Connections Charter Mgmt. 1, LP v.
Attorney General of Canada (“Cruise Connections”), 600 F.3d 661 (D.C. Cir. 2010), did not hold
that the “direct effect” clause applies in the absence of an injury to the plaintiff. Rather, the D.C.
6 Plaintiffs do not allege that any assets were transferred into the United States and therefore their assertion that such
transfers would constitute a “direct effect” is irrelevant. But, in any event, courts have held that a foreign state’s
payments in the United States do not constitute a “direct effect” in the absence of an express contractual obligation to
make such payments in the United States. See Helmerich & Payne Int’l Drilling Co. v. Bolivarian Republic of
Venezuela (“H&P”), 784 F.3d 804, 818 (D.C. Cir. 2015); Goodman Holdings v. Rafidain Bank, 26 F.3d 1143, 1146-
47 (D.C. Cir. 1994); Int’l Housing Ltd. v. Rafidain Bank Iraq, 893 F.2d 8, 12 (2d Cir. 1989).
7 Plaintiffs’ reliance on Orient Mineral Co. v. Bank of China, 506 F.3d 980 (10th Cir. 2007) is also misplaced. Orient
Mineral did not involve a transfer of assets out of the United States. Rather, it held that the “direct effect” clause
applied where the plaintiff, a U.S. corporation, was harmed in the United States when the foreign state allegedly
breached the parties’ contract by transferring the plaintiff’s funds to a third-party account in the United States without
authorization. See id. at 1000-02.
7
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Circuit held that the foreign sovereign’s breach of the parties’ contract had a “direct effect in the
United States” because it caused the U.S. plaintiff to suffer losses in the United States under
subcontracts with U.S.-based third parties. See id. at 665-66. While the defendant argued that the
plaintiff was not harmed by the termination of certain of the third-party agreements, the D.C.
Circuit concluded that this argument merely challenged the quantum of the plaintiff’s losses and
therefore concerned the merits of the case as opposed to the question of jurisdiction under the
FSIA. See id. Because the D.C. Circuit held that the “direct effect” was the injury to the U.S.
plaintiff, its passing observation that there is no requirement that the “direct effect” harm the
plaintiff is dicta.8 Moreover, that observation conflicts with the decisions of the Courts of Appeals
for the Fifth, Eighth, Ninth, Tenth and Eleventh Circuits which held that effects on third parties do
not constitute a “direct effect in the United States.” See Frank v. Commonwealth of Antigua &
Barbuda, 842 F.3d 362, 369 (5th Cir. 2016); Lubian v. Republic of Cuba, 440 F. App’x 866, 868
(11th Cir. 2011); Big Sky Network Canada, Ltd. v. Sichuan Provincial Gov’t, 533 F.3d 1183, 1191
(10th Cir. 2008); Corzo v. Banco Central de Reserva del Peru, 243 F.3d 519, 525-26 (9th Cir.
2001); Grossman, 991 F.2d at 1386 (8th Cir.).9
II. There Is No Personal Jurisdiction
Plaintiffs do not dispute that their failure to establish subject matter jurisdiction under the
8 The D.C. Circuit later clarified that its decision in Cruise Connections rested on “losses caused by the termination
of [the] contract” with the defendant and that there can be no “direct effect” in the absence of such losses in the
United States. See H&P, 784 F.3d at 817. Plaintiffs do not allege that anyone suffered a loss in the United States.
9 The Second Circuit has also suggested in dicta that the “direct effect” is not required to harm the plaintiff.
Atlantica Holdings v. Sovereign Wealth Fund Samruk-Kazyna JSC, 813 F.3d 98, 111 (2d Cir. 2016). Atlantica
Holdings held the foreign state’s alleged misrepresentations had a “direct effect in the United States” because those
misrepresentations caused economic losses to the U.S. plaintiffs in the United States. Id. at 110. The court then
observed that the “direct effect” clause would have applied even if all of the plaintiffs were foreign “provided that
Plaintiffs could adequately establish the existence of United States investors” who were injured in the United States
by the foreign state’s alleged misrepresentations. Id. at 111. Plaintiffs do not cite Atlantica Holdings presumably
because that decision is of no assistance to them as they do not allege that anyone suffered a loss in the United
States.
8
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FSIA also mandates dismissal of the action for lack of personal jurisdiction. (D.I. 29 at p. 11.)
III. The Complaint Should Be Dismissed for Failure to State a Claim
Plaintiffs’ fraudulent transfer claims are preempted by the FSIA’s substantive provisions
that afford foreign states, such as PDVSA, with the absolute freedom to transfer or dispose of its
property prior to judgment and preclude a U.S. court from ordering a foreign state to return any
property to the United States. (D.I. 24-2 at pp. 17-19.) Accordingly, Plaintiffs’ fraudulent transfer
claims must be dismissed for failure to state a claim upon which relief may be granted.
Plaintiffs do not respond to PDVSA’s arguments. Instead, Plaintiffs rely solely on their
opposition to the separate, but related, preemption arguments asserted by the CITGO Defendants.
In that opposition brief, Plaintiffs argue that the FSIA’s prohibition on prejudgment attachment,
28 U.S.C. § 1610(d), is inapplicable because they are not seeking any relief prior to the entry of a
judgment on their DUFTA claims. (D.I. 15 at pp. 10-11.) This argument ignores that fact that
Plaintiffs’ DUFTA claims are entirely predicated and contingent upon their pending arbitration
claims. The only relevant judgment is the potential judgment that Plaintiffs might seek if an
arbitral award is rendered in their favor because, without such a judgment, Plaintiffs cannot obtain
any relief, provisional or final, from this Court.
Moreover, the FSIA’s prohibition on prejudgment attachment is broadly applied. Courts
must look beyond mere labels and determine whether the relief sought by the plaintiff is “the
functional equivalent of attachment.” Thai Lao Lignite (Thailand) Co. v. Gov’t of Lao People’s
Democratic Republic, No. 10-cv-5256, 2013 WL 1703873, at *3 (S.D.N.Y. Apr. 19, 2013); see
also Janvey v. Libyan Inv. Auth., 478 F. App'x 233, 236 (5th Cir. 2012); Stephens v. Nat’l Distillers
& Chem. Corp., 69 F.3d 1226, 1229 (2d Cir. 1995). Here, Plaintiffs allege that the purpose of their
suit is to secure satisfaction of any judgment that might be entered on future arbitral awards. (D.I.
1 ¶ 1.) Thus, Plaintiffs’ Complaint is, in essence, nothing more than a petition for provisional
9
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relief in aid of the pending arbitrations. Such relief is the functional equivalent of a prejudgment
attachment and therefore barred by the FSIA.
CONCLUSION
PDVSA respectfully requests the Court to dismiss this action with prejudice.
HEYMAN ENERIO
GATTUSO & HIRZEL LLP
/s/ Samuel T. Hirzel
OF COUNSEL:
Joseph D. Pizzurro
Peter J. Behmke
Kevin A. Meehan
Julia B. Mosse
CURTIS, MALLET-PREVOST,
COLT & MOSLE LLP
101 Park Avenue
New York, NY 10178
(212) 696-6000
jpizzurro@curtis.com
pbehmke@curtis.com
kmeehan@curtis.com
jmosse@curtis.com
Dated: April 17, 2017
Samuel T. Hirzel, II (#4415)
300 Delaware Avenue, Suite 200
Wilmington, DE 19801
(302) 472-7300
shirzel@hegh.law
Attorney for the Defendant Petróleos de
Venezuela, S.A.
10
Case 1:16-cv-00904-LPS Document 30 Filed 04/17/17 Page 15 of 15 PageID #: 365